The Saudi Arabian Islamic Development Bank (IDB) has put its researchers on the task of developing blockchain-based products. The project has started with the research arm, Islamic Research and Training Institute, and has drawn in two blockchain partners: local company Ateon and the Belgian SettleMint. The first stage of the study will focus on technical feasibility.
Islamic finance is a strict system banning speculation and interest rates. It may be suitable to the properties of cryptocoins, which may be created as a fixed-supply asset and work without the need for inflation, interest rates and other techniques used to control the money supply of fiat currencies.
“In fact, several Islamic scholars hold the view that Bitcoin is more Halal (allowed) than fiat money (e.g. US dollars) in use today. For example, in Islamic literature, money needs to have intrinsic value. This is not true for paper-money in use today, but is true for Bitcoin because its value comes from the proof of work protocol…,” wrote Tim Lea, CEO of Veridictum and cryptocurrency expert.
The IDB stated that blockchain technology is especially appealing for the possibility of immediate settlement and the elimination of counterparty risk.
Saudi Arabia is among the countries with a more positive attitude to crypto-assets, although in that case they would be integrated with banking and not replace the banking sector outright.
Other Persian Gulf countries have tested blockchain technologies for various tasks such as real estate and land registries. Dubai has become one of the most active hubs of crypto-asset technologies, regularly hosting meetings and expos.